Sell in May and...miss out on the rally

Although typically the old adage "sell in May and go away" until the U.K.'s St Leger horseracing festival in mid-September, those opting at the start of the month to stay on the sidelines will be kicking themselves.

May is traditionally dire in many stock-pickers' handbooks, but equities have enjoyed a modest rally as it closes out the month on Friday. The S&P 500, which hit another all-time high Thursday, is set to end May with a gain of around 2 percent, its best month since February. Similar rallies have been seen on Japan's Nikkei 225 - which saw its first gain for five months - and the pan-European Euro Stoxx 600 Index.

Top of the heap includes Russia's Micex index, bouncing back 10 percent in May as investors grew increasingly confident in the country's stocks despite the Ukraine crisis. Germany's DAX index has also hit an all-time high and has logged a gain of 3.5 percent.

"The 'sell in May' call has not worked in its first month in 2014, with many global indices at or near their recent highs," Peel Hunt equity strategist Ian Williams said in a research note on Friday.

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Traders on the floor of the New York Stock Exchange.

Market-watchers have dubbed the recent run-up in stocks as an "unloved" rally. Traders are still making money but are wary of the scaling back of liquidity by the U.S. Federal Reserve and the hefty equity valuations that they believe this accentuated. If that wasn't enough, growth data from the U.S. on Thursday confirmed that the economy contracted in the first quarter of 2014 and there are also lingering fears of low inflation on both sides of the Atlantic.

Analysts at Bank of America Merrill Lynch have also pointed out that emerging markets (EM) have been having a quietly optimistic month despite a sell-off earlier in the year. EM equities have returned 4.7 percent so far this month, economists Alberto Ades and Isidore Smart said in a research note on Thursday, but called investors "gun shy" with their sentiment survey showing only 20 percent taking on more risk compared to a month ago.

Locally denominated and external debt have also returned promising gains, they added, along with a tick higher in the currency markets.

"Our brand-new (global emerging markets) fixed income and FX sentiment survey shows investors are fairly constructive on EM, but have not increased risk levels in line with this view," they said in the note.

"Real money investors appear to have reduced risk relative to the benchmark, while hedge funds either have kept risk unchanged or reduced it. With money still on the sidelines, there may be more room to run, especially as major central banks remain cautious."